NEW DELHI, March 16 (Reuters) - The frontrunner to become India's next prime minister has announced he will run for election in the holy city of Varanasi, a decision that could galvanise support among fellow Hindus but may focus attention on accusations of religious bias.

As India heads towards a general election that will start next month, Modi's Bharatiya Janata Party (BJP) said on Saturday the seat he will contest will be in Varanasi, where pilgrims come to wash away their sins in the sacred Ganges river.

Running for election in the ancient city, sometimes called the heart of Hinduism, will help Modi brush up his Hindu nationalist credentials and also focus his campaign on a key swing area, India's most populous state Uttar Pradesh.

Modi, who has ties to Hindu revivalist movements, is campaigning on his record of economic management as chief minister of the Gujarat state, and rarely talks about religion.

But the 63-year-old is dogged by accusations he did not do enough to stop religious riots in Gujarat in 2002 when mobs killed at least 1,000 people, mainly Muslims. He denies the accusations and a Supreme Court investigation did not find evidence to prosecute him.

"Grateful to the Party for giving me opportunity to contest the election from the holy city of Varanasi! An honour to contest from Varanasi," Modi wrote on Twitter.

Anti-corruption campaigner Arvind Kejriwal, who has shaken up India's political landscape since a shock electoral debut last year, said he was ready to compete against Modi for the seat.

"If people of Varanasi decide to give me this responsibility, I will accept it wholeheartedly," he told supporters.

Former tax-collector Kejriwal was elected to lead the Delhi state government last year but resigned after 49 days, accusing the BJP and the ruling Congress party of blocking his legislative agenda. He accuses Modi of collusion with big business.

Opponents and former supporters accuse Kejriwal of rabble-rousing and there have been violent clashes between his followers and supporters of the BJP.

Kejriwal's party is not expected to win many seats in the election, but it has frequently forced rivals onto the defensive by taking pot-shots at senior politicians in established parties it accuses of corruption.

The ruling Congress party's Rahul Gandhi on Sunday called opinion polls predicting his party's defeat "a joke" and said he expected to win the election.

In an interview with news agency PTI, widely reported in local media, Gandhi said Kejriwal's Aam Aadmi - or Common Man - Party would not be a factor at a national level.

He also criticised Modi, saying he had not been cleared of responsibility for the riots.

"The specific allegation and evidence pointing to Mr Modi's responsibility in the 2002 riots are yet to be adequately probed," he said, and suggested the Supreme Court investigation was flawed. (Editing by Robin Pomeroy)